Businesses seek 'certainty' from Washington, Economic Outlook 2021 speakers say

MOORHEAD - You can deal with good news, you can deal with bad news, but you can’t plan effectively in a time of uncertainty.

That’s why the nation’s businesses are looking for stability at the federal level from President Biden and Congress, political expert Rob Engstrom told Fargo Moorhead West Fargo Chamber of Commerce members during Economic Outlook 2021.

“Our country has gone through a protracted period of disruption,” Engstrom said during the online event, held Thursday, Feb. 18.

Americans want straight talk, stability and competence in government, he said.

“People in the business community need certainty,” Engstrom said.

Engstrom, founder of Wolfe Street Partners and the political strategist for the American Bankers Association, was joined at the event by Ron Wirtz, a regional outreach director at the Federal Reserve Bank of Minneapolis.

Engstrom said the bitter political battles of the last five years reflect at least 20 years of increasing polarization between Republicans and Democrats, making compromise hard to come by on issues affecting the business community.

Forty years ago, 90% of the members of the U.S. Congress landed near the middle of the political spectrum. Now it is a mere handful, with most of the members of the major parties shifted farther to the right and left, he said.

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Primary elections have become more important in the current political scene, and if business groups want to have their voices heard, they will have to become more active at that level.
“It’s imperative that business groups assert their voice and clarity in those primaries for national offices,” Engstrom said.

Despite having won the White House, Democrats hold but a slim majority in the House and only the slimmest of majorities in the Senate, with Vice President Kamala Harris being left to break any ties in a chamber evenly split between the two parties.

That means compromise will be necessary to move most legislation. Engstrom says that compromise can be found in areas such trade, immigration reform and mending the nation’s infrastructure.

“Our politics remains bitterly divided,” he said, but there are moderate Democrats in both the House and the Senate that can be relied upon to keep the needs of the nation’s businesses in mind. “I’m bullish in terms of what the future looks like,” he said.

Engstrom said there are also opportunities for Republicans to make gains in the House in the 2020 midterm elections, perhaps even taking the majority there.

Wirtz focused on the effects of the coronavirus pandemic on the economies of North Dakota and Minnesota.

Wirtz has a positive outlook for 2021, but key to reinvigorating the economy is throttling COVID-19.

“Controlling the virus matters. … If we fail to control the virus. It’s really hard for me to figure out a path to really strong growth,” Wirtz said.

The economies of Minnesota and North Dakota saw a strong bounceback in the third quarter of last year, but the fourth quarter saw much “softer” gains and the economy is still “well behind” pre-pandemic levels.

Some sectors fared worse than others, such as bars, restaurants and hotels, arts and entertainment. In North Dakota, mining and energy extraction took a hit as oil prices dropped and wells were capped throughout the Bakken Formation. But the agricultural sector has fared better.

Wirtz is keeping his eye on construction, too, because people need “confidence to build.”

The good news for employment is that job postings are near or above last year, Wirtz said, and Minnesota and North Dakota unemployment rates “are significantly lower” than the U.S. average.

But job postings don’t equal hirings. And there's “a lot of friction” between what employers want from prospective hires and what employees want to do as the pandemic continues.

Also, while unemployment has dropped steadily and significantly, much of that decline comes from people who have given up on searching for a job and left the workforce.

Wirtz said Federal Reserve surveys have found that firms are reporting average to slightly more negative revenue trends, with finance and real estate sector firms more positive than those in the hard-hit hospitality sector.

As far as worries about COVID stimulus spending, Wirtz said it is the better of two evils.

“If we don’t do anything, the decline we’re going to see is going to be tough to grow out of,” Wirtz said. If the economy sinks too far, “the path back to full growth is longer.”

Inflation shouldn’t be of great concern, he said, particularly since there has been little inflation in more than a decade. Once back to full growth, the country can pay back the debt, Wirtz said.